USDJPY, EURUSD, USDCAD

Fed interest rate decision --> USDJPY

Central banks will conduct their first policy meetings for 2025. The Federal Reserve projects that it will maintain interest rates at 4.5%. Despite Trump's new America First initiatives and government reforms, the strength of the US economy and ongoing inflation may constrain the Fed's capacity to lower rates. If inflation rises, Fed Chair Powell has signaled the possibility of rate hikes. But Governor Christopher Waller has hinted at multiple rate cuts in 2025 if inflation continues its current downward trend. Trump's trade policies—especially with relation to China—will determine how the market responds to Fed measures.

USDJPY has been trading within a tight range of 154.75-156.70 over the last ten days, holding within the short-term simple moving averages (SMAs) and near the medium-term ascending trend line. Further losses could lead the market toward the 200-day SMA at 152.80 ahead of the 151.10 support level. On the other hand, a move above 156.70 could send traders to the previous highs of 158.60 and 158.86. The MACD and RSI are moving lower.

ECB policy meeting --> EURUSD

Projections indicate that the ECB will continue to lower rates in 2025, a trend it has been pursuing since June 2024. Confirming this strategy at the Davos 2025 summit was President Lagarde, who stated that "gradual moves" are likely but decisions will remain data-dependent. Though some investors aim for a 50-bps decrease in January, markets predict a 25-bps cut every quarter. But the economic situation does not support more aggressive cutbacks; hence, surprises at Thursday's meeting seem improbable. Lagarde is expected to keep her current posture while the ECB lowers rates by 25 bps. Investors will search for clues about policy differences among the Governing Council and insights into the neutral interest rate.

EURUSD has skyrocketed above the medium-term falling trend line in the previous couple of sessions, standing above the 50-day SMA but failing to remain beyond the 1.0500 psychological mark. The 1.0530 barrier could serve as immediate resistance, followed by a journey to the 1.0630-1.0680 restrictive region. A decline could pave the way for the 1.0450 support and the 1.0370 line, and a dip below the downtrend line could sustain the negative structure. The RSI and stochastics suggest a bearish bias. 

Bank of Canada --> USDCAD

More aggressively than other big central banks, the Bank of Canada has dropped interest rates. With headline inflation of 1.8% y/y, December's CPI statistics enabled a further 25-bps cut in January. Investors only expect one more cut; the BoC probably won't pause very soon. The BoC might imply a slower pace of easing rather than a pause. GDP figures and future pay increases may help the currency somewhat.

USDCAD is moving back and forth on the medium-term uptrend line, remaining within a consolidation area of 1.4280-1.4465 since mid-December. If the price manages to successfully climb above the diagonal line and the 20-day SMA, it may face resistance from the 1.4465 barrier and the nearly five-year high of 1.4515. A rise above the latter levels would confirm the broader bullish picture. Alternatively, a break below the lower boundary of the range at 1.4280 could send investors to the 50-day SMA at 1.4240 and the 1.4195 support. The Stochastic is posting a bearish cross while the MACD is losing momentum.